By FXEmpire.com
The gold markets fell on Thursday as the Federal Reserve Chairman Ben Bernanke testified in front of Congress. The markets seemed to have convinced themselves that the Chairman would signal further easing, and tried to get out ahead of his testimony. The fact that he failed to mention a desire to implement easing worked in favor of the Dollar, and against a lot of the commodity markets such as gold.
The gold markets were looking for another “sugar high” from him, and he countered with the observation that he thought that easing again would have a sense of diminishing returns. The fact that he didn’t seem overly excited about going down that road, and because of this the markets sold off gold.
The market reacted sharply, and it looks as the market could continue a bit lower. The $1,540 level below could be the support level that the gold markets have to test again. The $1,500 level is the absolute “line in the sand” for the bulls, and if this level gives we will see an acceleration to the downside. The market is a possible buy at lower levels, but there is a sense of real concern buy the bulls at this point as we look around the markets for commentary.
The $1,640 level acted as perfect resistance on Wednesday, and it now looks as if the pair is going to bounce around between the $1,540 and $1,640 levels until some kind of clarity as far as easing and interest rates in general. The gold markets can be either a safety trade or a move from the inflationary concerns as well. The gold markets are very volatile at the moment, and as such will be difficult to trade as the markets seem to change their focus at the drop of a hat these days.
It is because of this that we have to have really wide trigger prices in this market. The daily close above the $1,640 level would be a great buy signal, and a daily close below the $1,500 level would have us selling gold hand over fist as it would show a real change in trend.
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Originally posted here
